“Everyone has a later life, so why do we stigmatise?” observes Paula Broadbent, managing director at developer Lovell Later Living. “A toddler who has just taken their first steps has a later life.”
Expert panel
- Mark Quigley, managing director – UK real estate finance, Beaufort Capital
- Paula Broadbent, managing director, Lovell Later Living
- Sarina Kiayani, policy and external affairs manager, ARCO
- John Nettleton, group property and partnerships director, Audley Group
- Chair: Lem Bingley, editor, Property Week
Mark Quigley
Paula Broadbent
Sarina Kiayani
John Nettleton
Broadbent is speaking at a think tank brought together by Property Week in partnership with Beaufort Capital at last month’s UKREiiF conference in Leeds. The goal is to explore how the later-living sector can overcome the barriers it faces, the need for a greater range of funding models and how the government and industry can best deliver inclusive, sustainable retirement living options in
the UK.
As Broadbent highlights, planning for later living ought to be a universal concern; but the reality is very different. Despite the key role it can play in supporting the UK’s ageing population, purpose-built later-living accommodation is still not seen as a valid option for older people nor as a mainstream investment opportunity within the industry.
A recent high-profile report by the Older People’s Housing Taskforce, commissioned by the previous government and published in November, has quantified the scale of the challenge by calling for the construction of 50,000 homes for older residents each year. Actual build rates are significantly lower.
Barriers include a lack of awareness among the general public of the benefits offered by integrated retirement communities (IRCs) and later-living schemes generally. Worse, the perception that such communities are expensive and unsuitable for many is both widespread and hard to shift.
“There needs to be better government regulation, building on the ARCO Consumer Code, so that all retirement housing operators disclose fees and charges and people don’t feel hoodwinked,” says Sarina Kiayani, policy and external affairs manager at industry body ARCO (Associated Retirement Community Operators).
Funding models are at the heart of the debate over how to increase the supply of older people’s living, but preconceptions about IRCs have held back lenders when it comes to supporting schemes. In particular, ‘event fees’ – deferred payments settled from the occupant’s estate, which can dramatically cut upfront costs – have led to fears of negative publicity.
“Having been a lender for many years, the last thing I ever want is for my company’s name to be emblazoned across the front page of The Sun with ‘Aunt Mabel’s [beneficiaries] charged a fortune in service fees after the death of their beloved family member’,” says Mark Quigley, managing director for UK real estate finance at Beaufort Capital. “That said, it is acknowledged that someone has to pay for the care.”
Quigley suggests updating the sector’s terminology. “The whole concept of downsizing [in retirement] has a negative connotation; arguably, it is rightsizing,” he says. “There must be lots of people who would be prepared to [consider IRCs]; the sector just needs to explain better what the choices are.”
Choice is vital
Establishing a wider range of choice across the sector is also needed to open up later living to mid-market customers, which might expand uptake and ease negative perceptions.
Broadbent agrees that choice is vital if the industry is to achieve its potential.
“We don’t all drive the same car, live in the same [type of] house, in the same type of village or finance these investments the same way,” she says. “So why should this change just because you are now badged an older person?”
According to Broadbent, the UK’s track record when it comes to providing a range of later-living options is “shocking” compared with other countries. She adds that for many people, there simply is not an affordable or appropriate product for them in later life.
Less affluent retirees “are a major part of the country’s population and deserve to be valued with a choice appropriate to them”, Broadbent argues. “We need to [incentivise] the industry to do the right thing and think [about] the retired nurses, teachers and mainstream workers.”
One operator that is looking to broaden its range of later-living options is Audley Group. John Nettleton, group property and partnerships director at the developer and operator, says his firm sees the mid-market as a key opportunity for growth.
“We are increasingly offering people choices around how much they pay monthly and how much they defer [as event fees],” he says.
Nettleton explains that at Audley’s Mayfield village near Watford, Hertfordshire, occupants can choose to pay the monthly charge of £636 a month plus a 1%-a-year final fee, capped at 15%; or they can pay £368 a month and 2% a year. “The majority go for pay less now, pay more later,” he says.
Audley’s Mayfield Watford IRC offers a range of one- and two-bedroom leasehold apartments designed for independent living. Nettleton says the community includes wellness and fitness facilities, a bistro, a lounge and optional onsite care services, providing residents with comfort, support and a vibrant lifestyle in later life.
But he warns that the financial flexibility that IRCs offer customers could be vulnerable to the government’s leasehold reforms that are making their way through parliament. Later-living operators might need to convince the government to give the sector special treatment, in much the same way that the Renters’ Rights Bill includes specific provisions for student accommodation.
Meanwhile, ARCO has drawn up a model retirement occupancy contract, which it says follows international best practice. It moves away from the traditional long-leasehold model towards a contract-based tenure.
“The UK is unusual in using leases to run older people’s housing,” Kiayani says.
“I know the Older People’s Housing Taskforce looked at alternative tenures, such as the licensed occupancy model, [which] does nwork very well abroad, but the UK is behind the curve.”
No national strategy
Quigley notes that the government has done little to encourage the development or take-up of later-living schemes. Deputy prime minister Angela Rayner gave a keynote speech at UKREiiF, highlighting the role of housing in the government’s pro-growth agenda and calling on developers to “build, build, build”. But she made no mention of housing for older people, reflecting the lack of a national strategy.
“I can’t quite understand why the government hasn’t embraced this up until now,” Quigley says, describing a “tsunami of issues coming down the line” due to the country’s ageing population. “Why wouldn’t we want to tackle these issues?”
In particular, he foresees problems providing care in parts of the country where the value accumulated in housing is insufficient to pay for later-life care. “I think there’s a geographical issue as well as a mass-market issue,” he suggests.
Without better transparency and oversight, especially around service and exit charges, public trust will remain low. Clarifying and even bolstering consumer protection may also unlock a wider client base for later-living communities.
“It is shocking that there isn’t more government regulation on this issue because I think if there was, consumers would feel more confident in making the move, knowing that they’re better protected,” says Kiayani.
She adds that New Zealand’s Retirement Villages Act 2003 could serve as a model for the UK by providing clarity and safeguards for residents.
“[New Zealand is] far more advanced in tackling these issues than we are in the UK,” says Kiayani, listing measures in the act such as provider registration and regulation, legal advice and a statutory dispute process.
“Because this was in law, people felt a lot safer and better protected moving into a retirement village,” she notes. “As a result, the sector [in New Zealand] is 10 times bigger than it is here in the UK.”
The New Zealand law also formalises deferred management fees, a path that Nettleton would like the UK to follow.
He suggests this would boost investor confidence by establishing a firmer basis for income over time, which would ease demand for earlier returns on investment.
“If we get some more patient capital – where we are not trying to make high returns in the development, whether that’s for rental or for sale, but we’re trying to get to that mature income – we could sell the apartments cheaper and get to the income at the end quicker,” he says.
Nettleton adds that patient funding deals are “starting to happen”, citing long-term agreements between Audley Group and institutional investors Legal & General and Royal London Asset Management.
“Institutional capital recognising the value of deferred management charges will lead to others following that route,” he says.
Beaufort’s Quigley also highlights the gap between developers that are keen to sell upcoming homes off-plan to speed up capital recycling and typically hesitant retirees who “want to see the finished product, to envisage themselves being in there”.
He adds that this tension may encourage novel tenures. “That is where retirement for rent versus retirement for sale [may work].
It’s almost like a try-before-you-buy for three months. At the end of three months, you’re probably thinking: ‘I wish I’d done this sooner.’”
Mass market
When it comes to the build-out model, the government could aim to emulate the student accommodation sector. But even in student housing, serving the affordable end of the market is an issue. Quigley notes that the student sector is still “slavishly” building blocks aimed at foreign students, more likely from China than Chingford.
“If I look at it from the retirement side, it is one thing to be able to look after the people who can afford and are prepared to pay [the fees]; but what about the mass markets in
this country?” he says. “We’re ignoring mass-market students and we’re potentially ignoring mass-market older people.”
Later living is no longer a niche concern and demographic trends in the UK suggest it deserves urgent policy attention. Without greater choice and better protections, more and more older people will be left stranded in unsuitable housing, worsening problems at the other end of the housing ladder.
“We have got to create places where people can live their best life and age well,” Broadbent says. “We have a huge housing crisis and health and social care crisis.
“There is a window of opportunity for government around the current [housing] debate to channel policy and national strategy to this agenda, and not only give customers the choice to live and age well where and how they want to, but to rebalance intergenerational communities through freeing up family homes and investment into local economies.”
Please visit:
Our Sponsor